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Review: Taxpayers across Canada funded projects cited for corruption

Sidhartha Banerjee, The Canadian Press
Published Monday, November 26, 2012 6:47AM EST

MONTREAL -- Taxpayers across the country had their money spent on Quebec construction projects identified at an eye-opening corruption inquiry as suffering cost overruns through collusion schemes, a review of contracts by The Canadian Press has revealed.

A search through public contracts tabled at the province's corruption inquiry has revealed numerous cases where federal money went to projects whose price tag was, according to witness testimony, inflated by scams.

The 91 contracts reviewed had been tabled at the inquiry in recent weeks as a pair of witnesses -- a disgraced construction boss and Montreal city official -- walked the commissioners through their role in the bid-rigging process.

A subsequent scan through those contracts has shown that at least 15 received federal funding, with the federal contribution in each case ranging from under $200,000 to more than $700,000.

And that could be merely the tip of the iceberg. The Canadian Press only examined documents tabled during the testimony of two early inquiry witnesses, only in the City of Montreal, only for sewer work, and linked to only one federal program.

The corruption inquiry has been shedding light on collusion tactics that raised the cost of Quebec projects by as much as 35 per cent -- as the Mafia, certain political parties, construction companies and corrupt city officials all cashed in on the illicit spoils.

The inquiry is still underway but it has already prompted the resignation of the mayors of Montreal and the big suburb next door, Laval.

Asked about those 91 contracts, the federal government has insisted that no new safeguards are necessary for the transfer of infrastructure dollars.

The Government of Canada says it sets a budget for infrastructure, but it's provincial governments that are responsible for choosing suitable projects.

A number of contracts qualified for funding under the Canada-Quebec Infrastructure Program Agreement, which started in 2000 and under which Ottawa contributed one-third of the costs.

That specific federal-provincial program sent $505 million to Quebec over a decade, before wrapping up in 2010, and did not include historic multibillion-dollar stimulus programs after 2008.

The Canada Economic Development for Quebec Regions, which oversaw the Canada-Quebec IPA program, says there is no indication in audits that any money was misspent.

"Each year, the governments of Quebec and Canada agreed on an audit plan. The plan is carried out by an external audit firm and the results have shown no irregularities," said Stephane Dufour, director of business development for the federal agency.

The inquiry has heard that collusion is difficult to detect.

While testifying, one crooked Montreal bureaucrat even bragged that his own bosses might have failed to catch him, had they wanted to, because he was so good at hiding inflated costs.

And the federal audits did not look as closely at the projects as the Charbonneau Commission is currently doing. Contracts are now being projected onto overhead screens while witnesses are asked to comment on them, one at a time.

The Canadian Press reviewed 91 tabled during the testimony of two witnesses who said they participated in bid-rigging: ex-construction boss Lino Zambito and retired city engineer Gilles Surprenant.

The result: more than a dozen dirty deals cited at the probe were funded by the feds.

The federal contribution to these questionable sewer deals represented 33.3 per cent of the winning bid. For example, Ottawa's share of a $2.29 million sewer contract in 2004 in the north-end borough of Ahuntsic was $764,636. In a 2003 example, the federal contribution for an almost $600,000 sewer deal in Rosemont, a district in eastern Montreal, was nearly $200,000.

The allegations made inside the inquiry have not been proven outside, and could be subject to contradictions in the remaining months of testimony.

A total of 891 projects were approved by the feds under that IPA program in Quebec.

The federal role was to review submissions for projects already accepted by Quebec, and to determine whether they met the criteria for the program.

While the federal government provided the cash, most of the responsibility for vetting and dealing with applicants fell to Quebec, Dufour said.

"The (federal) government doesn't deal directly with the project promoter -- that's why it's not responsible for contracts," Dufour said.

Quebec's own audit of the program showed no irregularities. The inquiry has heard in other testimony that the province was ill-equipped to guard against corruption because of a shortage of qualified staff and heavy workloads.

The province is now creating additional safeguards, such as hiring more engineers. As for the federal government, while the national Competition Bureau is examining corruption schemes in the province, it doesn't appear to be planning new safeguards.

Dufour says the federal government is confident that the existing ones work properly.

"For all our programs, checks and balances measures are already in place and ensure the sound management of our programs," Dufour said.

The federal government is being pressured to spend more money on municipal infrastructure.

Canadian cities are currently demanding a major increase in federal funding, by $2.5 billion a year to $5.75 billion, which they say is desperately needed to address aging infrastructure. The current federal funding regime ends in 2014 and the Conservative government is working on a new plan.

Dufour won't say whether the federal government is taking a second look at any past Quebec contracts. But he says it could.

"Each case is a particular case," Dufour said.

"In instances like the ones you are referring to we would analyze the situation, the available evidence, and then evaluate the remedies available under the existing agreements."

Since the contracts were between Quebec and the contractors, he said it would be up to the provincial government to seek legal recourse.

However, he said the federal government could call in the police: "In the event that there is a suspicion that a criminal act was committed, law-enforcement authorities will be informed."

The Canadian Taxpayers' Federation says the feds should just get out of funding projects better handled by other levels of government.

"Even if there were no allegations of corruption, it's just a dumb idea for the federal government to be mucking around with water plants and potholes and things for which they have no specific expertise," said Gregory Thomas, the organization's director.

Thomas said the funding process is flawed and lacks proper follow-up.

He said that there is a tremendous overhead cost in taking money from people in a province, then sending it back to them for provincially funded projects.

"It's a bad model and it doesn't enhance accountability," he said.

The Quebec inquiry will not examine the federal role. A spokesman for the probe has explained that any questions touching on the feds could be ruled out of bounds.

That includes questions about whether Ottawa had the proper oversight -- and whether federal political parties also benefited from illegal donations from construction companies.

But Thomas said the probe should still interest the federal government. He said people across the country have a right to be angry about the allegations coming out of the inquiry.

"Every dirty transaction, every dime that goes to organized crime, undermines the fabric of the country," he said.